PNB Housing Finance (PNB HFC) plans to raise up to Rs 2,500 crore in equity by issuing shares through rights issue to meet capital adequacy standards and support business growth.
Its board of directors approved the proposal to raise capital at a meeting held today. It would communicate the issue price, entitlement ratio and timing in due course, the company told the stock exchanges. On Wednesday, its stock closed 0.6% higher at 420.35 rupees per share on BSE.
Its capital adequacy ratio (CAR) stood at 21.59% with a level I of 18.9% at the end of December 2021.
In October 2021, PNB HFC abandoned its plan to issue preferred shares to raise Rs 4,000 crore from a group of investors led by private equity fund Carlyle. Protracted litigation and uncertainty surrounding approvals led to the cancellation of the deal.
Public sector lender Punjab National Bank, as sponsor, held a 32.57% stake in the HFC at the end of December 2021.
India Ratings last week flagged risks from high levels of delinquency at PNB HFC and said it was essential for the mortgage lender to raise capital to maintain adequate buffers to absorb credit costs. It affirmed the “AA” rating on the non-convertible debentures issued by the company and maintained a negative outlook.
The increased equity would strengthen PNB HFC’s position in mobilizing profitable liability, which would contribute to competitive loan pricing. Although deleveraging has reduced financial risk, asset-side risk remains high, the rating agency said.
PNB HFC has seen a decline in its loan portfolio since FY2019 due to the company’s conscious decision to reduce its wholesale portfolio, operational disruptions caused by Covid and stiff competition from banks. Its assets under management (AUM) fell to Rs 66,539 crore in December 2021 from Rs 74,469 crore in March 2021 and Rs 83,346 crore in March 2020.